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Tariffication with Supply Management: The Case of the U.S.-Canadian Chicken Trade

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Abstract

This paper considers the conversion of import quotas into tariffs, as may arise in the current round of General Agreement on Tariffs and Trade (GATT) negotiations, when the internal market of the country imposing the quota is not perfectly competitive. This case is illustrated by the chicken market in Canada, where producers exercise market power by restricting supply. In this setting, tariffs and import quotas are not equivalent. If a tariff reflecting current price differences between Canada and the United States replaced the import quota system, the price in Canada would be unchanged but chicken imports would be driven to zero. On the other hand, the tariff that would preserve chicken imports at their current levels upon abolition of the import quota is much lower, and would result in a considerable decline in the Canadian chicken price.

Suggested Citation

  • GianCarlo Moschini & Karl D. Meilke, 1991. "Tariffication with Supply Management: The Case of the U.S.-Canadian Chicken Trade," Center for Agricultural and Rural Development (CARD) Publications 90-gatt2, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  • Handle: RePEc:ias:cpaper:90-gatt2
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    Cited by:

    1. Meilke, Karl D. & McClatchy, Don & Gorter, Harry de, 1996. "Challenges in quantitative economic analysis in support of multilateral trade negotiations," Agricultural Economics, Blackwell, vol. 14(3), pages 185-200, August.
    2. Moschini, Giancarlo, 1991. "Economic issues in tariffication: an overview," Agricultural Economics, Blackwell, pages 101-120.
    3. Eales, James S., 1996. "A Symmetric Approach To Canadian Meat Demand Estimation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(02), December.
    4. Sumner, Daniel A. & Hallstrom, Daniel G., 1997. "Commodity Policy Compatibility With Free Trade Agreements," Harmonization\Convergence\Compatibility in Agriculture and Agri-Food Policy: Canada, United States and Mexico; Proceedings of the 3rd Ag... 1997 16914, Farm Foundation, Agricultural and Food Policy Systems Information Workshops.
    5. Gervais, Jean-Philippe, 1999. "Optimal trade policy, time consistency and uncertainty in an oligopsonistic world market," ISU General Staff Papers 1999010108000013564, Iowa State University, Department of Economics.
    6. Schmitz Troy G. & Schmitz Andrew, 2002. "Food Supply Management and Tariffication: A Game Theoretic Approach," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 1(1), pages 1-21, October.
    7. Cymbal, W. & Veeman, M.M., 1994. "Canadian Agriculture and GATT: An Economic Analysis of Article XI," Project Report Series 232387, University of Alberta, Department of Resource Economics and Environmental Sociology.

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